Giordano quits British Gas pay committee

MARY FAGAN

Industrial Correspondent

Richard Giordano, chairman of British Gas and the man at the centre of one of Britain's biggest executive pay rows, resigned yesterday from the company's remuneration committee.

His resignation comes as the government-backed Greenbury Committee on executive pay prepares an attack on the remuneration policy in the utilities industry, believed to be recommending that changes to the way executives are paid be submitted to shareholders at annual meetings.

Mr Giordano's move is the latest in the scramble to anticipate the Greenbury report, due for publication on Monday. Earlier this week it emerged that Sir Colin Southgate, chairman of Thorn EMI, resigned from the company's remuneration committee. British Airways said yesterday it would scrap its executive share option scheme. Greenbury is not expected to criticise share options but will encourage companies to look at alternative incentive plans.

Mr Giordano's decision also follows months of public outcry against the 71.2 per cent pay increase given to British Gas's chief executive, Cedric Brown, bringing his total salary and benefits to pounds 492,602.

Mr Giordano, who receives pounds 450,000, has repeatedly given a robust defence of Mr Brown's pay. His climbdown was greeted as "welcome but belated" by Pensions and Investments Research Consultants, which has campaigned for Mr Giordano's resignation from the committee, and for an overhaul of the company's executive pay policy.

Alan MacDougall, joint managing director of Pirc, said: "There can be no doubt that Mr Giordano's position on the committee was the main factor behind the unacceptable remuneration proposals at British Gas. In Pirc's view his departure is therefore an admission that those proposals were flawed."

British Gas said Mr Giordano had left the remuneration committee "to avoid any possible concerns over his independence in relation to executive remuneration".

A spokesman added: "Richard spoke to his colleagues, institutions and the remuneration committee and this is the decision he has reached."

The revelation by British Airways that it will drop its executive share option scheme came at yesterday's annual meeting at London's Barbican Centre. Sir Colin Marshall, chairman, said that while the practice of granting executive options had become established throughout industry, the board thought it "no longer appropriate".

"We shall be interested to see the findings and recommendations of the Greenbury Committee. However, our present view is that executive share options should cease to be granted this year, to be replaced by an effective long-term scheme."

Under the BA executive share option scheme, directors were shown as having a total of 1,728,978 options outstanding at the end of March. Of these, 211,287 were granted in the past financial year, according to the 1994/5 report and accounts.

Sir Colin, who was granted a further 108,368 executive options last year, was shown as having 791,607 outstanding at the end of the year.

News that BA would scrap its scheme came against stormy scenes outside the Barbican, where members of the Transport & General Workers Union were protesting about the possible phasing out of its national pay-bargaining structure.

The union threatened strikes over the busy bank holiday period as about 1,500 workers harangued and jeered Sir Colin and his fellow board members on their arrival at the meeting. The TGWU said it would ballot 20,000 members working for the airline on strike action that would start on August Bank Holiday Monday.

George Ryde, the union's aviation officer, said he could not rule out an all-out strike because of workers' anger over the company's plans to end national bargaining for pay and conditions. BA wants to set up 22 local bargaining units as an efficiency measure.

Mr Ryde said a walk-out by cabin crew, engineers, baggage handlers, caterers, supervisors and security staff who belong to the union would cause "disarray" and could cost the airline millions of pounds.

The TGWU represents 9,000 cabin crew, 5,000 administrative staff and thousands of other workers at BA. It last took industrial action at BA in 1993, when it claimed that a 24-hour strike cost the company pounds 50m.

Robert Ayling, British Airways' managing director, said after the AGM that a ballot for industrial action would be "quite inappropriate" and that BA had always made it clear the proposals were up for discussion.

"I think it is very unfortunate for any responsible union to threaten mass disruption when the processes of discussion and negotiation are not complete."